Basics of Sustainability

Environmental
Legislation and
Incentives
in the UK

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Contents Page
Aims......................................................................................................................................... 2

Introduction .............................................................................................................................. 3

International Legislation ........................................................................................................... 3

European Union (EU) Legislation ............................................................................................. 4

UK Legislation .......................................................................................................................... 5

Environmental Legislation in the UK Construction Industry ...................................................... 6

Environmental Incentives in the UK Construction Industry ....................................................... 9

Corporate Social Responsibility (CSR) ................................................................................... 11

Bibliography and Further Reading .......................................................................................... 12

Aims
By reading this section, you should be able to:

Understand the various types of legislation that govern UK law.

Know how environmental legislation is brought into force in the UK.

Understand the main environmental legislation and incentives that concerns the UK
construction industry, as well as the support and financing options that are available.

Recognise what Corporate Social Responsibility (CSR) is and what its benefits are.

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Introduction
The regulatory framework in the UK recognises that the environmental issues that are
encountered daily, and in the future, are not limited to this country alone. The environmental
impact of our daily work and social practices has a global effect and, to that end, the
regulatory framework is very much influenced by policy decisions made by the United Nations
(UN) and the European Union (EU) at international forums that lead to international legislation.

This module aims to set out the process of legislation and regulation within the UK, alongside
prominent examples, and the laws that seek to protect and enhance the environment that
applies to the UK construction industry. In addition, the module explores the incentives,
financial or otherwise, that exist to influence and/or mitigate environmental impacts.

The Kyoto Protocol (adopted in 1997 and enforced in 2005) and the Stern Review on the
Economics of Climate Change (2006) pushed the environmental impact of businesses to the
forefront of the sustainability agenda, and to the attention of governments, subsequently
leading to an increase in legislation. However, there is not always a clear business case to be
sustainable, and there is also scientific and political debate over the cause(s) and effect(s) of
climate change.

Either way, legislation is in place to ensure that there is a base business case (i.e. meet
legislation or face monetary fines/other penalties) and it is recognised that most, if not all,
resources are finite and, as they become progressively harder to extract or recycle, their cost
will go up. Therefore, even with the environmental impact pushed aside, it is in the best
interests of business to achieve the minimum baselines set by legislation, and often beneficial
to exceed them.

There is therefore a stick in the form of legislation and the rising cost of resources, and the
carrot the positive incentives to be more sustainable. These vary from direct incentives
such as feed-in tariffs for electrical generation, indirect incentives such as better yield on
properties due to the high environmental specification, through to reputational gains for
businesses from being a responsible and sustainable organisation.

International Legislation
When laws are made by the UN they can be identified as being hard law or soft law. Hard
law is when a country agrees formally to become a party to a protocol, convention or a treaty,
thereafter that party is bound legally to keep to that which is stated within it. An example would
be the UN Framework convention on Climate Change (New York, 1992). This is an
international treaty that states that the countries involved must co-operatively consider actions
to limit global average temperature increases and, to date, it has 195 members. This treaty led
to the Kyoto Protocol (1997). The Kyoto Protocol legally binds developed countries to
greenhouse gas emission reduction targets. The Protocols first commitment period started in
2008 and ended in 2012, while the second commitment period is between 2013 and 2020.

Soft law is not enforceable, with parties having no obligation to comply; these types of laws
seek to influence the actions of states by means of charters, declarations, agendas or
recommendations.

The International Court of Justice (ICJ) can enforce a breach of international law. However,
within the UK, this is only possible if legislation has been passed within the UK to enable it to
become enforceable.

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European Union (EU) Legislation
EU law is divided into primary and 'secondary' legislation. The treaties (primary legislation)
are the basis or ground rules for all EU action, and can be considered as the overarching
principles to the powers the EU have. Secondary legislation consists of the regulations,
directives and decisions that make up the laws that filter into, or even override, UK legislation.

There are three main types of EU secondary legislation:

Regulations

EU Regulations are directly applicable to all EU member states and are enforceable by law,
for example, Regulation 261/2004, which covers the rights of passengers on flights in the
event of delays, cancellation or denied boarding. Regulations are one of the most powerful
forms of EU law. When an EU regulation comes into force it overrides all national laws that
deal with the same specific subject matter(s), and any subsequent national legislation must
conform to any related EU regulations.

Directives

Directives are binding, but not necessarily immediately applicable, as they are required to be
implemented by each member state to achieve the desired effects stated in that directive.
Environmental legislation is usually introduced into the system by way of an EU Directive. UK
law generally ratifies these Directives as either primary legislation (Acts) or secondary
legislation (Statutory Instruments or SIs), subject to how significant the change to UK law is.
Directives normally allow some leeway within the wording as to the exact rules to be adopted
by all member states. Examples of Directives that affect construction can be found later in the
module.

Decisions

A decision is only binding to those whom it is addressed, such as a particular EU country or an

individual company. For example, the European Commission issued a decision on 4 March
2009 that Microsoft was abusing its dominant market position, and fined Microsoft for this.
Very few decisions result in amendments or changes to UK law.

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UK Legislation
There are two elements to law in the United Kingdom, Criminal & Civil.

Fig. 1: The Distinct Features of Civil and Criminal Law

Criminal Law Civil Law

Crimes
Offences against society
Mainly statute law
Action brought by State
Intended result is punishment
Punishment cannot be insured against
Action can be taken regardless of loss
Proven guilty beyond reasonable doubt
Torts
Offences against the individual
Mainly common law
Action brought by individual
Intended result is compensation (damages)
Insurance can be obtained
No action is possible without a loss
Proven liable on the balance of probabilities

Criminal Law

Criminal law consists of laws made by Parliament that are called Acts, Regulations or
Statutory Instruments. The main body of environmental legislation in the UK is criminal law,
and the contravention of these laws can result in fines, sanctions on business trade or even
prison.

Examples of environmental legislation in the UK are:

Conservation of Habitats and Species Regulations 2010

Control of Pollution (Oil Storage) (England) Regulations 2001
Environment Act 1995
Hazardous Waste (England and Wales) Regulations 2005
Hazardous Waste (Wales) Regulations 2005
Land Drainage Act 1991
Nitrate Pollution Prevention Regulations 2008 (England only)
Producer Responsibility Obligations (Packaging Waste) Regulations 2007
Site Waste Management Plans Regulations 2008
Water Industry Act 1991
Water Resources (Environmental Impact Assessment) (England and Wales) Regulations
2003
Water Resources Act 1991
(Source: Environment Agency, 2011)

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Civil Law

Civil law covers such areas as contracts, negligence, family matters, employment, and land
law. The Environment Agency was given the power to impose civil sanctions on businesses in
England and Wales in 2010. Unlike criminal law and the prospects of prosecution, civil
sanctions are imposed by the Environment Agency. The EA could still choose to prosecute
environmental offences, but civil sanctions give them more flexibility on the way they enforce
regulation. There are six types of civil sanctions:

Compliance Notice - a Regulator's written notice requiring actions to comply with the law,
or to return to compliance, within a specified period;

Restoration Notice - a Regulator's written notice requiring steps to be taken, within a

stated period, to reverse the harm caused by non-compliance, so far as possible;

Fixed Monetary Penalty - a low-level fine, fixed by legislation, that the regulator may
impose for a specified minor offence;

Enforcement Undertaking - an offer, formally accepted by the regulator, to take steps that
would make amends for non-compliance and its effects;

Variable Monetary Penalty - a proportionate monetary penalty, which the regulator may
impose for a more serious offence;

Stop Notice - a written notice that requires an immediate stop to an activity that is causing
serious harm or presents a significant risk of causing serious harm.

Environmental Legislation in the UK Construction Industry

This is not an exhaustive list, but does cover the primary and most prevalent types of
legislation that affect the construction industry.

Examples of EU Directives

2010/13/EU - Energy Performance of Buildings Directive

The European Directive on the Energy Performance of Buildings (EPBD) took effect from 4
January 2006. A recasting of the requirements, which will be more demanding, was
approved in May 2010 and came into effect in early 2013. The EPBD aims to promote the
improvement of energy performance in buildings by encouraging owners and tenants to
choose energy efficient buildings when seeking new premises, and to improve the energy
efficiency of buildings that they already occupy. In the UK, the EPBD was implemented
through major changes to the Building Regulations 2006 and the introduction of energy
certification (DECs and EPCs) for both domestic and non-domestic properties.

1999/31/EC - EU Landfill Directive

Adopted in 1999, the EU Landfill Directive 1999/31/EC was transposed into UK law
through the Landfill (England and Wales) Regulations 2002. It requires a reduction of

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 biodegradable waste sent to landfill. Waste is reclassified, establishing new categories of
inert, hazardous and non-hazardous landfill sites.

2008/50/EC - Ambient Air Quality Directive

The 2008 ambient air quality directive sets legally binding limits for concentrations in
outdoor air of major air pollutants that impact public health such as particulate matter
(PM10 and PM2.5) and nitrogen dioxide (NO2). As well as having direct effects, these
pollutants can combine in the atmosphere to form ozone, a harmful air pollutant (and
potent greenhouse gas) which can be transported great distances by weather systems
(Defra,2011).

Examples of UK Legislation

Climate Change Act (2008)

The Climate Change Act sets in place a legally binding agreement target to reduce carbon
dioxide emissions by at least 80% by the year 2050 (based on 1990 levels as detailed in
the Kyoto Protocol), The government must report every five years on progress through
carbon budgets. Much of the ensuing legislation is in place to ensure the UK meets those
targets, and will likely

Energy Performance Certificates (EPCs) and Display Energy Certificates (DECs)

EPCs are required when buildings are constructed, sold or rented out and when existing
buildings undergo major alterations. An EPC provides residential and commercial buildings
with an asset rating and is a calculation based on the Reduced Data Standard
Assessment Procedure (RdSAP) software. The RdSAP methodology has, however, been
shown on several occasions to be flawed, with the EPC assessment itself sometimes
relying on assumptions as well, and contributes to the controversy around design versus
as built compliance; the so-called energy performance gap of buildings. EPCs show the
energy demand of a building on a scale between AG, and provide recommendations to
occupants on how to improve the rating. Since 4 January 2009 every commercial building
over 50m2 has required an EPC for sale or letting; sellers and prospective landlords must
make this available free of charge to prospective buyers or tenants before a property is
viewed, or when written information is provided about the building as a result of a request
by a prospective purchaser. EPCs are also required for all new construction work over
50m2.

DECs are required for public buildings with a total useful floor area of 500m2 or more and
were created as a direct response to the EU Energy Performance of Building Directive
(above). Despite using the same A-G scale as EPCs, DECs differ as they show actual
energy use of a building and the associated carbon dioxide emissions, and also provide a
comprehensive Advisory Report (AR) that details how to reduce emissions from the
building further. There is a penalty system in place for organisations that do not display an
up-to-date DEC or have an AR.

CRC Energy Efficiency Scheme

The Carbon Reduction Commitment (CRC) Energy Efficiency Scheme is a mandatory

carbon trading system designed as both a carrot and stick to incentivise large public and

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private sector organisations, which are responsible for around 10% of total UK greenhouse
gas emissions, to reduce their environmental impact. It rewards businesses that adopt
energy efficiency measures, and punishes those that remain passive by forcing them to
buy carbon credits. The scheme works in tandem with the existing European Union
Emissions Trading Scheme (EU ETS) and climate change agreements. It applies to
organisations with one or more half-hourly electrical meter readings over 6,000mwh in
2008, which includes many large contractors.

The CRC contains an annual performance league table that ranks participants on energy
efficiency performance. With the reputational considerations that a league table has, the
scheme encourages organisations to develop energy management strategies that promote
a better understanding of energy usage, as well as raise awareness of the environmental
agenda and encourage behavioural change.

Site Waste Management Plans

Since 6 April 2008 all construction projects in England and Wales with a value of more
than 300,000 have had a site waste management plan (SWMP). These aim to help
contractors reduce construction waste and identify the by-products produced, then
minimise them by using materials efficiently, utilising recycled products and ensuring
waste is disposed of responsibly. On completion, the performance is checked against
targets and lessons learned are carried through to the next job so that individual
contractors can build up a portfolio of improvements. There is, however, ongoing debate
with regard to the depth behind some of these green initiatives, and the true carbon cost of
recycling materials to a plant that may be some distance from the site. SWMP are planned
to be removed in England as a regulation from October 2013, but are planned to continue
in Wales.

EIA Environmental Impact Assessments

An Environmental Impact Assessment (EIA) is the process for identifying the

environmental impact of proposed developments. The legal requirements derive from the
Town and Country Planning (Environmental Impact Assessment) Regulations 1999 as
amended by the Town and Country Planning (Environmental Impact Assessment)
(England and Wales) (Amendment) Regulations 2006 and 2007. More detail on EIAs is
given in Module 9.

FRA Flood Risk Assessments

It is vital that checks are carried out at an early stage of all new developments to
determine whether or not they are located in areas that fall within the Environment
Agencys flood plain map (available at www.environment-agency.gov.uk/homeandleisure/)

The Environment Agency requires a Flood Risk Assessment (FRA) to be submitted

alongside planning applications for developments over one hectare in size, and areas that
are known to be at flood risk. Sustainable Drainage Systems (SuDS) are an effective
technique that manages surface water and groundwater sustainability, both in areas of
natural drainage, and urban areas that have been altered with drainage networks.

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 Fig. 2: Flood risk map of central London (Environment Agency)

BREEAM and the Code for Sustainable Homes

Both the Building Research Establishment Environmental Assessment Method (BREEAM)

rating and Code for Sustainable Homes (CSH) ratings are set into local authorities
planning regulations, and are therefore normally necessary for any new build. BREEAM is
the worlds most widely used system for assessing, reviewing and improving a range of
environmental impacts associated with buildings. BREEAM can be used on any type of
building, new and existing, commercial or residential. Ratings are Pass, Good, Very
Good, Excellent and Outstanding; see www.breeam.org for more details.

The CSH is a largely voluntary standard that acts as a pathway to Zero Carbon Homes,
which are to be mandated for all new build housing from 2016. The Code awards new
homes a rating from Level 1 to Level 6 based on their performance against nine
sustainability criteria, which are combined to assess the overall environmental impact.
Level 1 is entry level with criteria just above the building regulations, while Level 6 is the
highest, reflecting exemplary developments in terms of sustainability.

Environmental Incentives in the UK Construction Industry

As well as the regulatory environment, there are also numerous incentives, as well as support,
for businesses, communities and individuals to install/buy sustainable technologies and
reduce their impact on the environment.

Renewables

In 2003, Merton Council in southwest London introduced a requirement that all new
developments were required to have 10% of their energy use provided from renewable
sources. Many local authorities have taken on this so called Merton rule, with some of
them now extending to 20% as part of their planning requirements (including the Greater
London Authority).

Until recently, renewables have been imposed by the stick of planning law, however the
introduction of Feed-in Tariffs (FITs) and the Renewable Heat Incentive (RHI), as well as
Enhanced Capital Allowances a form of tax relief for installation of renewables have
provided a carrot.

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A FIT is a mechanism for small-scale (<5MW) low carbon electricity generation, most
prominently solar PV, but also for small-scale wind, hydroelectricity, anaerobic digestion
biogas and Combined Heat and Power (CHP) installations. After an initial installation cost,
an electricity supplier pays the owner for each kilowatt of electricity generated for a set
period of time under terms of a contract. In addition, excess electricity can be exported
back to the grid for payment, and savings are made on electricity bills.

More on FITs can be found here: www.gov.uk/feed-in-tariffs/overview

The Renewable Heat Incentive is a motivator for organisations, businesses, and

communities to install renewable heat generating technologies, such as solar thermal
panels and ground source heat pumps, and be paid per kilowatt in a similar manner to
FITs. Domestic properties are due to benefit from the RHI in 2014.

More on the RHI can be found here: www.gov.uk/government/policies/increasing-the-use-

of-low-carbon-technologies/supporting-pages/renewable-heat-incentive-rhi

Enhanced Capital Allowances

Enhanced Capital Allowances (ECAs) enable a business to claim 100% first-year capital
allowances on their spending on qualifying plant and machinery. There are three schemes
for ECAs:

Energy-saving plant and machinery

Low carbon dioxide emission cars and natural gas and hydrogen refuelling
infrastructure
Water conservation plant and machinery

Businesses can write off the whole of the capital cost of their investment in these
technologies against their taxable profits of the period during which they make the
investment.

More information can be found here: http://etl.decc.gov.uk/etl

Support and finance

The Carbon Trust is a not-for-profit company set up by the UK government to provide

specialist support to help business and the public sector cut carbon emissions, save
energy and commercialise low carbon technologies. The Carbon Trust Advisory Service
helps companies address issues across the climate change and sustainability agenda by
developing and implementing strategies.

The Carbon Trust Implementation Services and Siemens Financial Services provide a
range of energy efficiency financing options to help businesses save energy and money.
There are other bodies that can provide advice in different areas, such as the Waste &
Resources Action Programme (WRAP) which focuses on waste management. Like the
Carbon Trust, WRAP provides advisory services, but on efficiency of the supply chain,
effective waste prevention and reduction, and recycling, among other areas.

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Corporate Social Responsibility (CSR)
Business sustainability is often defined as managing the triple bottom line a process by
which firms manage the financial, social and environmental aspects of their business, as
well as the risks and opportunities that these three strands impose on them. Companies that
adhere to sustainable business models can create economic value and build a strong
company while also creating economic value and contributing to both a healthy ecosystem
and their local community.

Corporate Social Responsibility (CSR) is a business approach that ensures companies are
accountable and responsible for impacts resulting from their activities in the environment they
operate in. Importantly, the UK Government is committed to CSR being an integral part of all
annual company accounts and, as of April 2013, has mandated quoted companies to report
on their greenhouse gas emissions.

There are a number of terms that are interchangeably used with regard to CSR, such as
corporate responsibility, sustainability, sustainable development and corporate citizenship. In
2002, Adrian Cadbury, former chairman of Cadbury PLC, placed CSR in the following context:

The continued existence of companies is based on an implied agreement between business

and society. In effect, companies are licensed by society to provide the goods and services
which society needs. The freedom of operation of companies is, therefore, dependent on their
delivering whatever balance of economic and social benefits society currently expects of
them.

What is covered by CSR?

The issues that are encompassed in CSR are driven by societal needs and, as such, both
open to interpretation and liable to evolve over time. Therefore, businesses need to be alert to
societal trends and react accordingly.

The following list, compiled by Zaman (2003) is representative of CSR issues:

Corporate governance
Health and safety
Employee rights
Supply chain management
Marketing and communications
Environmental impact
Community and societal responsibility
Animal rights
Investment/shareholder activism
Technology and data privacy
Government intervention
Business ethics

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There are a number of best practices that foster business sustainability and help organisations
move along the path from laggards to followers to leaders. These practices include:

Stakeholder engagement: Organisations can learn from customers, employees and their
surrounding community. Engagement is not only about pushing out messages, but
understanding opposition, finding common ground and involving stakeholders in joint
decision-making.
Environmental management systems: These systems provide the structures and
processes that help embed environmental efficiency into a firms culture and mitigate risks.
The most widely recognized standard worldwide is ISO 14001, but numerous other
industry-specific and country-specific standards exist.
Reporting and disclosure: Measurement and control are at the heart of instituting
sustainable practices; what you cannot measure, you cannot manage. Not only can
organisations collect and collate the information, but they can also be transparent with it.
The Global Reporting Initiative (GRI) is one such example of a widely used voluntary
reporting standard.
Life cycle analysis: Organisations wanting to take a large leap forward should thoroughly
analyse the environmental and social impact of the products they use and produce through
life cycle analysis. For example, using sustainably sourced timber and other construction
materials.

Benefits of CSR

The business case for CSR has been proffered by governments, NGOs (Forum for the Future,
The Natural Step, Christian Aid, Business in the Community), industry bodies (Health and
Safety Executive, Chartered Institute of Personal Development, Chartered Institute of
Building) and businesses themselves (Marks & Spencer, Puma, KPMG), to name but a few.
Firms that are sustainable have been shown to attract and retain employees more easily and
experience less financial and reputation risk. In addition, an increasing number of awards are
bestowed to companies for their sustainability achievements and vision, with innovative and
adaptive approaches to their environments. Companies that lead or follow the path of CSR are
increasingly being recognised as part of the catalyst for change, rather than an obstacle to
improvement.

Bibliography and Further Reading

Defra, International, European and national standards for air quality [internet], available
from: www.gov.uk/government/policies/protecting-and-enhancing-our-urban-and-natural-
environment-to-improve-public-health-and-wellbeing/supporting-pages/international-european-
and-national-standards-for-air-quality (accessed 15 May 2013)

Environment Agency Civil Sanctions [internet], available from: www.environment-

agency.gov.uk/business/regulation/116844.aspx (accessed 15 May 2013)

United Nations Framework Convention on Climate Change [internet], available from:

unfccc.int/2860.php (accessed 15 May 2013)

Royal Institution of Chartered Surveyors (RICS), Watts Pocket Handbook (2011)

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Stern, N. (2006) The Economics of Climate Change [internet], available from:
webarchive.nationalarchives.gov.uk/+/http:/www.hm-treasury.gov.uk/sternreview_index.htm

Zaman, A. (2003) Converging Trends in Corporate Responsibility and Corporate

Governance, The Royal Institute of International Affairs

BREEAM www.breeam.org

Carbon Trust business advice service www.carbontrust.co.uk/cut-carbon-reduce-costs/large-

business/advisory-services/pages/default.aspx

Carbon Trust and Siemens Financial Services Energy Efficiency Financing

finance.siemens.com/financialservices/uk/products_solutions/equipment-finance-
leasing/energy-efficiency-financing/pages/index.aspx

CRC Energy Efficiency scheme www.gov.uk/crc-energy-efficiency-scheme

Department for Energy and Climate Change (DECC)

www.gov.uk/government/organisations/department-of-energy-climate-change

Enhanced Capital Allowance scheme http://etl.decc.gov.uk/

Environment Agency www.environment-agency.gov.uk

Waste and Resources Action Programme (WRAP) www.wrap.org.uk/

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